By David Drake
South Korea has made news for having regulated the cryptocurrency industry in Asia. In September 2017, the Financial Supervisory Service (FSS) banned initial coin offerings (ICOs). In January 2018, the Financial Services Commission (FSC), the country’s financial regulator, enforced a ban on anonymous cryptocurrency trading.
However, this is set to change in the coming following a change of guard at the FSS. The new FSS governor, Yoon Suk-heun, has hinted that the regulator will consider relaxing cryptocurrency regulations. Cryptocurrency players across the globe are looking forward to regulatory changes in the country.
Latif Sim, Chief Information Officer at GCOX says, “Regulation can be seen as an explicit, formal contract between business and society. The intent of regulation is therefore to ensure that markets function in a fair, efficient and orderly manner. Hence, the question is therefore not whether a relaxed regulation will promote adoption but rather is the regulation in place sufficient to protect the interest of both the public and the companies. It will be a delicate balance which regulators have to consider, ensuring flexibility for companies to add value to the space and at the same time investors and the public are sufficiently educated and protected from the ponzis.”
A Major Crypto Hub
Globally, South Korea has become a major cryptocurrency hub. The country ranks fourth in cryptocurrency trading after Estonia, the United States and Japan despite the fact that its population is considerably smaller, less than California and Arizona combined. The country’s influence on the crypto market is huge according to Luis Manuel Lopez, the General Coordinator at WorkChain Centers.
He says,”It is the large volume of South Korea’s market that, to a large extent, dictates the value of cryptocurrencies across the world. According to an official study, more than a third of salaried Koreans have an average of $ 5,000 invested in cryptocurrencies, which represents a great adoption of an investment vehicle only in speculation.”
In an interview with the Korea Times newspaper, the new FSS Governor, Yoon Suk-heun, agreed there are many things that need to be looked into in terms of crypto regulations, including reviewing the existing regulations. However, he was noted that changes to those regulations will be tackled gradually.
The appointment of Yoon Suk-heun, who is seen to be a reformist by many, has renewed hope and optimism in the South Korea cryptocurrency market. On his part Henry Jenkins, the CEO of Goldma notes that country’s leaning towards relaxing cryptocurrency regulations will help address at least three cryptocurrency issues.
He says, “One, it would add more stability to the crypto market. Two, it will help spur more crypto based products and services. Lastly, it would provide more confidence for institutional investors to enter the crypto market.”
As Suk-heun settles in office, cryptocurrency players already want him to prioritize reviews on the use of real names to operate crypto accounts, just like is required in conventional bank accounts. This requirement set by the FSS has put new investors at loggerheads with banks, resulting in the rejection of new crypto accounts.
Explaining why this requirement is unnecessary, Reginald Ringgold III, Founder of Decentralized Crypto Exchange & Index Fund BlockVestico says, “First, crypto accounts apply user identity at the beginning and at the end of a transaction via digital wallets. Tokens are stored in digital wallets instead of bank accounts and only the owner has access to the wallet. The owner can send and accept tokens to and other wallets by providing an identification code of his wallet to the other side of the transaction. The code itself acts as a key, eliminating the need for names or other types of identification.”
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.